Over the counter transactions: A threat to or a facilitator for digital finance ecosystems?

The digital finance industry is both young and dynamic, and as it grows, it is constantly innovating to address the issues it faces. One of the key contemporary issues is over the counter (OTC) transactions. The delivery of mobile money over the counter raises a number of questions since it can: 1) limit product and ecosystem evolution; 2) decrease provider profitability; and 3) lead to unregistered transactions, which run the risk of money laundering and terrorism financing.

This report explores these questions and, with the help of data from the Helix Institute, InterMedia, and the Groupe Spécial Mobile Association (GSMA), provides an analytical perspective on the pros and cons of the OTC to arrive at conclusions and key considerations which move the industry forward.

The report begins with an all-inclusive definition of OTC which considers the typology of different types of OTCs based on the different usage behaviours. In the next section, key concerns that the industry has, and validity of these concerns with respect to OTC methodology have been analysed. The authors of this report argue that certain types of OTC should be seen as a stepping stone to mobile money account adoption and usage. Lastly, the report presents the conclusion and highlights four key considerations for the industry to mull over which would accommodate the preferences of all stakeholders, namely users, agents, providers and regulators, given the data presented and some of the new developments in the field.

This report is by the ITU DFS Focus Group – Ecosystem Working Group. The authors of this report are Anup Singh and Graham A. N. Wright, with review by Mike McCaffrey, Cecily Northup, and Carol Coye Benson.

The DFSA (Dubai Financial Services Authority) Innovation Testing Licence provides a controlled environment for the testing of innovative FinTech ideas without being subject to more comprehensive regulatory requirements.

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The Columbia Institute for Tele-Information (CITI) is a university-based research center focusing on strategy, management, and policy issues in telecommunications, computing, and electronic mass media.